Online CFD trading is a fast and dynamic financial market. To ensure you can earn profits in such a market, investors must have tried and tested CFD and forex trading strategies that will help them to pick out and exploit the best opportunities at any given time. At AvaTrade, we are committed to ensuring that traders get access to comprehensive educational materials that not only help one to develop a personal trading strategy but also to learn and use tried, tested and proven technical strategies in the financial market.
Trading strategies are not one-size-fits-all; different traders are comfortable with different strategies within different market conditions. It is therefore important to determine the type of trader that you are (short term or long term) as this will determine the timeframe chart that you will focus on. CFD and forex traders mostly utilise technical analysis methods in analysing the price changes of their preferred assets.
This requires the understanding of price action methods (candlestick types and candlestick patterns) as well as the different categories of technical analysis indicators that help measure price elements such as momentum, trends, volatility, market cycles and volume. When trading online, the most reliable way of avoiding losses and gaining a consistent edge in the market is by being educated. This is why CFD and forex trading strategies require continuous education and relentless practice to fully comprehend their strengths and weaknesses.
Strategies go beyond entry and exit price points. In an inherently uncertain market like this, risk management is an important pillar of any strategy. A solid risk management plan will guide your strategy in terms of the investment amount, the maximum loss per trade, maximum drawdown, and even when it is time to change or tweak the entire strategy.
In the end, the most important element of a strategy is YOU. You must have the discipline and focus to apply your trading strategy in the right manner, in the right market conditions at all times. At AvaTrade, we understand this. That is why we offer comprehensive trading education to our clients so that they can gain relevant trading knowledge and techniques that can help them to make knowledge-based decisions in the financial markets. Here are our top technical trading strategies to get you started.
The basis of technical analysis is that history tends to repeat itself. This means that technical analysts believe that past price behaviour can provide reliable cues of possible future price action. Technical analysis indicators help traders understand the prevailing price action, and ultimately to identify the best price points to enter or exit a trade in the market.
The price of financial assets is determined by forces of demand and supply, just like in any other trading market. In financial markets, it is support and resistance levels that accurately illustrate how the supply and demand forces interact to determine the prevailing price of an underlying asset. Learn how to use them here.
Chart patterns provide a reliable way of tracking price changes in the market. They help traders identify prevailing market conditions (existing trends as well as key support and resistance levels). Chart patterns also help in anticipating possible changes in market conditions and provide an objective way of taking advantage of arising trade opportunities.
Because of the amount of information they provide, candlesticks form the basis of technical analysis. The size and shape of a candlestick tell an important price action story. This is why traders look for candlestick patterns when trading.
RSI indicator is one of the oldest, most reliable and popular oscillators. What are the benefits of this indicator and what is the most efficient way of using it for trading? Read this article to learn how to install and implement this powerful tool in your trades.
The MACD (Moving Averages Convergence Divergence) is one of the core indicators in technical analysis, second in popularity only to the Moving Average. Often referred to as “trend oscillator” it serves as a basis for numerous trading strategies, both as a standalone indicator or combined with other indicators. Read our MACD trading strategies guide to learn more.
Moving Average (MA) is probably the most widely used technical indicator in online trading. There are several types of moving averages, (simple, exponential, smoothed, linearly weighted), which can be used by themselves, or in conjunction with other indicators. Read more about MA trading strategies in this guide.
What is CCI Indicator (Commodity Channel Index)? What are its advantages and disadvantages? In this article, we will give answers to these questions and discuss several CCI-based trading strategies both for beginners and experienced traders.
The stochastic indicator is one of the most powerful and commonly used technical analysis tools. It belongs to the momentum oscillators group of indicators that help traders establish overbought and oversold conditions in the market.
Bollinger Bands are an effective and common technical analysis indicator that is used by traders in order to understand the price volatility of a specific financial instrument. This indicator was named after its creator, John Bollinger, a famous technical analyst, who created them back in the 1980s.
Also known as Ichimoku Kinko Hyo (which translates as ‘a one-look equilibrium chart’), the indicator helps traders to pick out high-quality trading opportunities in trending markets, to establish price momentum, as well as to plot definitive support and resistance price zones.
Parabolic SAR (parabolic stop and reverse) is one of the most popular trend-following indicators. Its appeal is that it not only helps in identifying the prevailing trend, but also when the trend ‘stops and reverses’.
The Aroon indicators are a type of momentum oscillator that was developed in 1995 by Tushar Chande. It tells whether an asset is trending and how strong that trend is. It can also be used to locate correction periods and to identify when the market is consolidating.
Created by legendary trader Welles Wilder in 1978, the Average Directional Movement Index (ADX) is a technical analysis tool used by traders to establish trend strength as well as trend direction.
Donchian Channel is a volatility indicator that helps technical analysts to identify and define price trends as well as determine the optimal entry and exit points in ranging markets.
The Triple Exponential Moving Average (TRIX) is a powerful technical analysis tool designed to help traders determine the momentum of a price as well as identify overbought and oversold conditions in an underlying financial asset. TRIX was developed by Jack Hutson in the early 1980s, and as its name suggests, it is used to show the rate of change in a triple exponentially smoothed moving average.
Bill Williams was born in 1932 and traded the commodity markets successfully for over 50 years. He also developed his own proprietary indicators that are now extremely popular and available on most trading platforms.
The Rate of Change (ROC) is a price-based indicator designed to measure the rate at which the price changes from one period to another. The measure of the current price in relation to a defined look-back period is the typical rate of change definition. However, when expressed as a percentage, ROC can help traders determine not only momentum, but also overbought and oversold conditions as well as the trend direction. ROC is a momentum oscillator; other indicator types similar to ROC include MACD, RSI and ADX.
The Keltner Channel is a volatility-based technical analysis indicator that helps in defining price trends as well as pinpointing overbought and oversold conditions in the market. Chester Keltner, a famous commodity trader, introduced the indicator in the 1960s, but the modern-day version (that includes the ATR, average true range) was updated by Linda Raschke in the 1980s.
The Money Flow Index (MFI) is a technical analysis indicator that literally allows traders to ‘follow the money’. That is, this indicator measures the flow of money into and out of a security over a specified period of time. By observing the MFI, traders can determine whether there is buying or selling pressure in the underlying asset.
The Relative Vigour Index (RVI) is a technical analysis indicator designed to measure the conviction of the recent prevailing price action of an asset, as well as the possibility of its continuation in the short and medium-term. The RVI indicator was developed by Donald Dorsey in 1993. The author then updated it into the current version in 1995. RVI belongs to the broad Oscillator group of indicators, which essentially means that it helps traders to determine overbought and oversold conditions in the market.
Awesome Oscillator is an amazing technical analysis indicator designed to measure the underlying market momentum as well as to confirm trends and anticipate reversals. The Awesome Oscillator was developed by the legendary chartist Bill Williams, who described it as the ‘best momentum indicator’ that is ‘as simple as it is elegant’.
Developed in the 1930s by Ralph Nelson Elliott (and named after him), Elliott Waves are essentially a law of nature that describe how the collective psychology and sentiment of market participants drive the demand and supply of underlying assets.
Pivot Points have been used by investors since the early days of technical analysis to map out quality support and resistance zones in the market. Investors have always actively sought areas where an underlying asset can find demand or supply.
The Average True Range (ATR) is a common technical analysis indicator designed to measure volatility. This indicator was originally developed by the famed commodity trader, developer and analyst, Welles Wilder, and it was introduced in 1978.
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